Questions and Answers
What happens to the quantity of labor demanded when wages decrease in a competitive labor market?
It increases
What effect does higher wages have on the quantity of labor supplied in a labor market?
It increases
What is the term used for a situation where a single buyer or a few big buyers have significant bargaining power in a labor market?
Monopsony
What term is used to describe a business using its bargaining power as a major buyer of labor to pay lower prices, including lower wages?
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In a competitive labor market, who determines the wage for workers?
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What happens to the quantity of labor demanded when wages decrease in a competitive labor market?
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What does the law of supply suggest about the quantity of labor supplied when wages increase?
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What is the impact of a single or few big buyers, with 'buying power', in a labor market?
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What is monopsony power in the context of labor markets?
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In a competitive labor market, who determines the wage for workers?
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What happens to the quantity of labor demanded when wages decrease in a competitive labor market?
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What is the impact of a single or few big buyers, with 'buying power', in a labor market?
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What term is used to describe a business using its bargaining power as a major buyer of labor to pay lower prices, including lower wages?
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What determines the wage in a competitive labor market?
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What does the law of supply suggest about the quantity of labor supplied when wages increase?
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Study Notes
Labor Market Concepts
- In a competitive labor market, when wages decrease, the quantity of labor demanded increases.
- When wages increase, the law of supply suggests that the quantity of labor supplied also increases.
Monopsony Power
- Monopsony power refers to a situation where a single buyer or a few big buyers have significant bargaining power in a labor market.
- This situation gives the buyer(s) the power to determine the wage for workers.
- As a result, the buyer(s) can use their bargaining power to pay lower prices, including lower wages, a concept known as monopsonistic exploitation.
Competitive Labor Market
- In a competitive labor market, the wage for workers is determined by the interaction of supply and demand forces.
- When wages decrease in a competitive labor market, the quantity of labor demanded increases.
- Conversely, when wages increase, the quantity of labor supplied also increases, according to the law of supply.
